Certified Government Financial Manager (CGFM) Practice Exam 2025 - Free CGFM Practice Questions and Study Guide

Question: 1 / 875

What type of tax is levied for a specific purpose, with proceeds deposited into an account restricted to that purpose?

Deductible Tax

Dedicated Tax

The correct choice identifies a tax that is explicitly designated for a particular use, with the funds collected being directed into an account that is specifically restricted to that purpose. This type of tax ensures that the revenue generated can only be utilized for the designated project or service, creating a direct link between the tax levied and the funding of specific governmental activities or programs.

Dedicated taxes are often used for funding essential public services such as education, infrastructure, or health care, among others. This dedicated nature provides transparency to taxpayers, as they can see that their contributions are directly supporting the intended projects.

Understanding dedicated taxes is important for effective public finance management, as it helps ensure accountability and can aid in garnering support for various initiatives since taxpayers understand how their money is being utilized.

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Discretionary Tax

Earmarked Tax

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